This is not a news flash: Payments is about the most complex platform
industry there is and igniting innovation in payments is anything but a
given these days, even if a company is doing it within the construct of
a successfully operating platform. The complexity, as we all know, rests
with the discipline of having a strategy that can create the delicate
balance across all stakeholders, deliver traction in a relevant
timeframe and drive profits.

But this perhaps is: “An abundance of evidence suggests that greater
attention to the ways in which organizations and incentives shape the
innovation process can produce significantly better results,” remarks Josh
Lerner, Harvard Business School Professor and author of The
Architecture of Innovation. This new book sheds new light on how
corporations should organize their innovation initiatives in order to
produce the best results: getting innovation to market and ignited. The
implications to the payments industry are real and they are relevant.

Lerner makes the case in the book that Corporate R&D doesn’t necessarily
yield the desired outcome. He points out in his book that as recently as
the end of the 1990s, for those companies that organized innovation that
way, R&D-driven innovation contributed less than 25 percent of the value
of what investments in traditional assets would have produced for that
company (e.g. supply chain efficiencies, cost reductions, etc.). Venture
investing isn’t seen as the panacea either. Investments made by the
entire venture capital sector over the course of any given year amount
to much less than the R&D budgets of a single giant pharmaceutical firm
like Merck or a automotive giant like GM. And, in 2011, venture-backed
firms represented less than 10 percent of all publicly traded firms in
the U.S.

So, what would? Well, surprisingly, what many have already started to
do. Simply stated, it involves having corporations invest in promising
start ups, usually through a separate entity, and then creating an
operating model that is helpful enough to the venture without drowning
it in the corporate bureaucracy that would only slow things down – or
worse.

There are two forces of nature that are moving the industry in this
direction. First, the largest players in the space are today funding
dozens of “innovation experiments” focused on driving payments into the
mobile realm, and more broadly expanding the reach of electronic
payments. At the same time, access to new technologies and the
availability of IP-enabled devices such as the smart phone and tablet
reduced the barriers to entry for many an emerging venture to make a
play for something new, innovative and game-changing. Hundreds of
millions of dollars of venture money poured (and are pouring) into the
sector to foster the “next” new thing in payments. In 2012 alone, more
than $1 billion was invested in emerging payments firms by VCs. But as
good (and well funded) as their great ideas might be, most of these
ventures will need distribution and scale to ignite and access to the
“incumbents” to make that happen in any sort of meaningful way. They’ll
also need access to the people inside the organization who can “school”
them on what it means to be in the payments business. Many of them have
no clear idea of its complicated inner-workings.

Those two forces, Lerner believes, sets up exactly the right environment
for the right model for innovation in large organizations – corporate
venturing – something that takes the best of both worlds and devises a
structure, a framework and a set of incentives for advancing strategic
goals and generating good returns on those investments.

The
Innovation Project 2013 interactive keynote session on The
Architecture of Innovation in Payments will tackle this topic
head on. Lerner and Diane Offereins, President of the Discover
Network, will engage four C-suite innovators — all pioneers in
designing and deploying innovation in payments — on a wide-ranging
discussion of incentives, partnership strategy, innovation design,
ignition obstacles and more. Offereins is credited with coming up with
the idea to license the Discover network to other innovators to propel
their innovation agenda four years ago. She will give Innovation
Project 2013 delegates a peek inside the strategy that was used to
develop and deploy this strategy internally, and use that to engage the
panel on the impact of that strategy on innovation inside of the
payments sector. Panel participants include:

Chris Gardner, co-Founder and CEO of Paydiant, a
cloud-based solution that enables banks and merchants to accept
payments via the mobile phone. Gardner will share his thoughts on how
he and Paydiant have aligned incentives for innovation with some of
the biggest bank and merchant partners in the US.

Mike Kennedy, Chairman of ClearXchange and EVP for innovation at
Wells Fargo, will describe ClearXchange’s blueprint for
getting the three biggest banks to the table around a new idea, and
how that framework may change in order to take ClearXchange to the
next level of innovation in mobile payments.

Chitra Narasimhan, Managing Director at CitiVentures, will
offer her insights about how to structure and incent innovation inside
huge financial institutions and provide support to emerging ventures
without overwhelming them in corporate bureaucracy.

Mike Pasilla, CEO of Elavon, will describe how
innovation works at Elavon and explain how he attracts and retains key
partnerships while balancing the requirements of his bank parent
company, and payments regulatory environment.

Over 2 days, more than 100 speakers and 500 senior members of the
payments industry will change the way that the payments and its broader
commerce ecosystem thinks, talks, delivers and ignites innovation. On
March 20th and 21st the greatest minds in
commerce and payments will assemble at Harvard University near Boston to
kick the conversation about innovation up to an entirely different level
at a program called The Innovation Project. Speakers and
delegates are among the most senior executives and elite innovators from
literally every established payments company worldwide, along with the
CEOs/founders of the most innovative start-ups. One of its five modules
includes pairing industry CEOs with external thought leaders such as Al
Gore (former US VP), SteveLevitt (Freakonomics),
Eric Reis (The Lean Start Up), Rosie Rios (US
Treasurer), Russell Simmons (Rush Card), Raj Date (CFPB),and Josh Lerner(Architecture of Innovation) to
challenge the conventional wisdom around what it will take to get
merchants and consumers to adopt new ways to shop and pay. Warren
Buffett is the program’s keynote. The Innovation Project also
hosts the industry’s 2013 PYMNTS.com Innovator Awards, given to
15 of the industry’s top innovators over dinner, which this year will be
emceed by B.J. Novak of The Office and will introduce delegates
to 40 of the hottest “next generation” payments innovators. The
ThinkAThon will challenge a small group of delegates to frame
solutions to tough industry problems and compete in front of delegates
and judges for the title of “Master Payments Guru 2013.”

About PYMNTS.com

PYMNTS.com is reinventing the way in which companies in payments share
relevant information about the initiatives that shape the future of
commerce and make news. This powerful B2B platform is the #1 site for
the payments industry by traffic and the premier source of information
about “what’s next” in payments. C-suite and VP level executives read it
daily for these insights, making the PYMNTS.com audience the most
valuable in the industry. It provides an interactive platform for
companies to demonstrate thought It provides an interactive platform for
companies to demonstrate thought leadership, popularize products and,
most importantly, capture the mindshare of global decision-makers. It’s
where the best minds and best content meet on the web.

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